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  • Private use of assets or private pursuits in business

    If an asset purchased by a business is used for a mix of business and private purposes, you can only claim a deduction for the portion of the expenses related to your business.

    We continue to improve data matching processes across a range of sources to identify entities that may be using business assets for personal purposes without appropriately accounting for that use.

    We also look at the use of assets for private pursuits that are not appropriately accounted for under the law, including deductibility of expenditure, Division 7A or fringe benefits tax.

    Situations that attract our attention include:

    • private aircraft ownership or activities
    • art ownership and dealings
    • car or motor bike racing activities
    • high value and charter boat activities
    • enthusiast or high value motor vehicles
    • grape growing and other farming pursuits
    • horse breeding, racing and training activities
    • holiday homes and rental accommodation
    • sporting clubs and other activities involving participation of the principals of private groups or their associates.

    We address the following tax risks:

    Income tax

    We focus on issues about:

    • if an entity has claimed deductions against other income for the conduct of private pursuits or assets that are private in nature–this is a tax risk if the entity is not carrying on a business relating to those assets or pursuits
    • eligibility for an immediate or accelerated deduction in relation to assets.
    • incorrectly apportioning deductions where the asset either
      • has been used for both income producing and private purposes
      • is not available for rent or hire
    • entities that have disposed of assets but have not reported revenue income or capital gains.

    Fringe benefits tax

    We are concerned about entities that have purchased assets through their businesses but have used them for the personal enjoyment of an employee or associate.

    GST

    We are concerned about entities that have claimed input tax credits for expenditure for private pursuits.

    Superannuation

    We are concerned about self-managed super funds (SMSFs) that have acquired assets and used them for the benefit of the fund's trustees or beneficiaries.

    See also

    Last modified: 09 May 2022QC 69480